Examination of Witnesses (Question Numbers
40-59)
DEPARTMENT FOR
INTERNATIONAL DEVELOPMENT
30 NOVEMBER 2009
Q40 Mr Curry: How sustainable are
programmes which are based on subsidy? You subsidise the fertiliser,
and the Report comments that between 25% and 35% of the fertiliser
could have been bought at market prices, and also that any decline
in food does not seem to be sustainable after the first year or
so, so perhaps the poorer citizens are not benefiting directly.
How sustainable is it to base a programme on subsidy? Are we producing
a mini-CAP for Malawi?
Dr Shafik: It is quite different
from the CAP since the CAP produces excess beyond need, but I
understand your point.
Q41 Mr Curry: The point is this is
a subsidy-based programme and I am suspicious at how sustainable
those subsidy-based programmes are.
Dr Shafik: I completely agree
with you. I am an economist by training. Personally, I approved
this programme several years ago in my previous role and was greatly
sceptical about the exact point you are making. There are two
compelling arguments. One is, what is the counterfactual? In this
case, the counterfactual was humanitarian assistance. People would
have starved and we would have had to ship in food aid. We had
to do that in 2005 and it cost us £21 million. This programme
cost us a grand total of £6.8 million last year and has resulted
in bumper harvests and for the last four years Malawi has not
needed food aid. For starters, when you think about the counterfactual
of food aid, it is cost-effective. The second compelling argument
is the independent cost benefit analysis that we commissioned
of this programme that shows in every year it actually had a positive
economic rate of return and the cost benefit was exceeded, with
the exception of 2008, which was a very special year, as you implied.
Q42 Mr Curry: Let us leave aside
for the moment the problem of encouraging trade between developing
countries which might get over the need for food aid in some circumstances.
What about the alternative of market-based approaches? I am associated
with an organisation called International Development Enterprises,
which is one of the Bill Gates funded programmes, and we operate
largely in Ethiopia. That is entirely market-based. It is based
on very small-scale, primitive, if you like, technologies, like
treadle pumps, and the farmer has to buy it or rent it, and if
he cannot keep up the payments it goes. Microfinance is organised
so he can raise the money and the farmer is given help in getting
products to market so he can earn money, or sometimes it is her,
so they can expand their patch or send one of their kids to school.
What this does is create more self-sufficiency and also a mini
market economy. It is tough love but I find that an approach which
commends itself very strongly to me as a sustainable programme
over a longer term. Would you envisage moving to something more
akin to that and over what timescale?
Dr Shafik: I agree with you. I
would prefer a world where Malawian farmers had access to credit
and could buy inputs on the market. That is much better and much
more sustainable. We are in a second best world with this current
input subsidy programme. I would much prefer to move towards the
kind of programme that you identify. That is clearly where we
would like to take Malawi in the medium-term. Malawi is a long
way from that at the moment and, again, if the counterfactual
is humanitarian assistance, this is better than that. It is a
trajectory here. It is also important to remember that by most
standards this programme has been tremendously successful. The
President of Malawi has received countless awards from the FAO.
The BBC called it the Malawian miracle just last week. 14 other
countries have visited Malawi to see how this programme works.
It is not ideal, I completely agree with you, but in a second
best world it is a pretty good programme.
Ms Hines: As Minouche has said,
the long-term and the ideal would be something. It is important
to understand that at the moment that is very difficult to do
because, as the NAO's Report makes clear, 90% of the farmers are
subsistence farmers working a plot of an average size of an acre.
Land is Malawi is not collateral because it is customary land
which belongs to the village and not to you personally, which
means at the moment you cannot use that as collateral to get credit.
That is something which is being looked at and we, as DFID, are
involved in a number of schemes using the treadle pumps and other
things to encourage local co-op style development. This year,
the government is taking cash crops out of the subsidy programme.
Tobacco was previously part of it and that has now been removed
because there are now financing mechanisms for cash crops which
enable you to do it that way.
Q43 Mr Curry: While the programme
is heavily maize orientated, and I understand that is because
it is a hunger alleviation programme, there are much better crops
which would go to develop a market economy, for example, garlic
and vegetables.
Dr Shafik: I quite agree with
you.
Q44 Mr Curry: With the lack of a
developed market farmers do not get a better price for their products.
What are you trying to do to incentivise market production and
help incentivise the markets themselves? Maize is a boring commodity,
a crop which is essential to keep people fed, but the exciting
things are these much more diversified products.
Dr Shafik: Gwen and I went to
a village and sat down with a group of women and asked precisely
these types of questions: why the obsession with maize, why not
consider other crops which would generate higher returns for farmers.
Given that Malawi has a history of such food insecurity, growing
your own maize to feed your own family is, to be candid, a national
obsession. Until people have food security for their households
they will not consider switching to other crops which would remunerate
much more.
Ms Hines: There are things which
DFID is doing through the rest of its programme to encourage private
sector development in Malawi. For example, one of the things we
have done in the past year was help the government to update its
own mining map using the British Geological Society. There is
now a big uranium mine in the north of Malawi which is going to
produce $150 million a year. That is a huge chunk for an economy
the size of Malawi's.
Q45 Mr Curry: You can buy a lot of
maize with that.
Ms Hines: You can buy a lot of
maize with that.
Q46 Mr Curry: You could buy it from
Zimbabwe if it could produce it.
Ms Hines: Just last week, we published
with the government a new country economic memorandum and part
of that was a growth constraints analysis. Last year Malawi had
a growth rate of 9.7% and that is unprecedented in Malawi. Since
2005 it has had an average of 8% after 25 years of stagnation.
Maize has helped to achieve that. The point of the research we
did and which we published last year was to say what in the future
will help deliver growth in Malawi and what are the constraints,
including access to finance, which we can work with the government
to tackle.
Q47 Mr Curry: Can I just come back
to a point I made earlier? The Report does state that somewhere
between a quarter and a third of subsidised fertiliser could have
been bought by people at market prices. It looks like the poorest
Malawians have not been targeted directly on the assumption that
they will benefit from a general reduction in the price of food,
yet on page 35 it says that, while more food is available, beyond
the first year food prices have not decreased and at the time
of writing the Report were still high. Have you really helped
the poorest people?
Dr Shafik: This programme was
not intended to reach the poorest of the poor, for example, landless
households; it was meant to reach the productive poor who could
use the inputs effectively. The best evidence of the impact on
the rural poor is that rural wages have risen faster than maize
prices, so rural workers' incomes actually went up. I think that
is quite a compelling story. The evidence we have is that about
a million people have been lifted out of poverty in the last few
years, in large part as a result of the gains that have been made
in the agricultural sector.
Q48 Mr Burstow: I just wanted to
draw attention to figures 2 and 16 which address issues around
poverty and then the ratio of nurses to population varying by
district. It is quite striking that, if you look about halfway
from the bottom of figure 16 to the middle of the table, many
of the districts referred to there are at the top of the league
table when it comes to being in ultra-poverty and poverty. I am
particularly interested to explore what is being done to address
the issue of deficiencies of doctors and nurses in rural locations.
Why has Malawi not made more progress in this area to incentivise
and get more medics into the hard to staff areas?
Dr Shafik: Again, it is important
to remember the baseline from which we are starting. Life expectancy
in Malawi fell from 48 to 39 years, one of the lowest rates of
life expectancy in the world, mainly due to HIV. In 2004, 10 out
of 28 districts had no doctor present. Now all districts have
at least one doctor and the ministry of health has confirmed that
by 2011 all districts will have at least three doctors. Starting
from an incredibly low base, they have made fairly decent progress.
Q49 Mr Burstow: Just on that point,
if I may, briefly, in paragraph 2.16 it does say that by the end
of 2007 in many districts a third of nurses and two-thirds of
doctors remain behind the 2005 national average baseline, let
alone the national targets for subsequent improvement. There are
places where the lack of progress is masked by perhaps greater
progress in maybe more urban areas.
Dr Shafik: The government has
problems, like all countries, in getting people to be posted in
poorer, rural isolated communities. They have built 500 houses
which the ministry of health has recently constructed to try and
make it more attractive for people to locate in rural areas. The
minister of health, who I met, is looking at a package of additional
incentives to make it attractive to people to move to rural areas.
Q50 Mr Burstow: The Report describes
the salary top-up for doctors and nurses as a possible way of
addressing this issue. Why has DFID not chosen to adapt that as
a way of trying to help direct doctors and nurses into these areas
both to make sure they are properly paid but also to incentivise
those moves?
Dr Shafik: It is something we
can look at, which is increasing the financial incentives for
rural postings. The top-up scheme has been remarkably successful
at retaining health workers in Malawi. We are helping to pay for
a 50% increase in wages, which has stemmed the tide of health
workers leaving the country. It was often said that there were
more Malawian health workers in Manchester than there were in
Malawi; that is no longer the case. It has also encouraged many
people to stay in the health sector because many health workers
and nurses were switching to other professions because pay was
so low. Clearly, the ministry of health does need to look at whether
they can use additional financial incentives to get people to
stay in rural areas.
Q51 Mr Burstow: How do you know that,
given that it says in paragraph 2.19: "The health ministry
does not compile annual data, and attrition will be measured in
an evaluation of the programme between September 2009 and June
2010"? Do you actually have data that really allows you to
say that with confidence?
Ms Hines: As the Report said,
it is not something which is measured on an annual basis. What
we have got is data from the beginning when we know that, for
example, in the first year of the health swap in 2005 there were
96 health workers who left Malawi and in the following year there
were 30, so that was a huge fall even in the first year. There
are various ways which we use to triangulate the data that we
do have. If you go to any hospital or any clinic in Malawi, what
they will have is flipcharts on the wall showing how many health
staff they have, and they have everything from how many births
they have to how many deaths they have and what types of operations.
Aggregating data at the national level and quality controlling
that is difficult, but if you are prepared to go round the country
and go to the health facilities, as we do, you can actually pick
up a huge amount of very rich data to spot-check what you are
seeing from the national government data. I would also point out,
as the NAO Report acknowledges, that it takes six years to train
a doctor in Malawi. Since this health swap was only launched in
2004, we are only now beginning to see the real improvements in
terms of numbers of doctors and that is why, as Minouche has already
said, the doctor figures will improve so dramatically over the
next couple of years.
Dr Shafik: Just to add to that,
they are producing 500 nurses and 55 doctors every year who are
entering the system and that will improve the numbers even further.
Q52 Mr Burstow: That is obviously
very encouraging. You mentioned earlier on that now every area
has at least one doctor, but the Report refers in 2.16 to the
fact that in many cases where that one person is in place they
are temporary appointments. What is being done to make sure that
this workforce growth is sustained and sustained growth is put
into the places where it is most needed?
Dr Shafik: Clearly, getting the
numbers up is a key part of that and additional incentives to
rural postings is another part.
Ms Hines: There are a number of
ways the government tries to do this from the salary top-up to
additional training. They are also looking at bonding to a certain
extent people who are trained through the government system so
they have to serve in rural areas, which is something they do
with teachers as well. It is also something that we have been
talking to the World Health Organisation about because they are
doing a study on this globally, how you can incentivise health
workers to go and stay in rural areas. They are looking at Malawi
as an example. Their preliminary conclusions suggest there is
no quick-fix solution; what you need is a range of these types
of measures. In Malawi, the health programme which we are currently
funding will be subject to a major evaluation over the next 12
months as it draws to the end of this first phase so that we can
make sure the second phase is even more carefully targeted.
Q53 Mr Burstow: Can I briefly switch
to another area, which is going back to the line of questioning
Mr Curry was asking on about maize and particularly this issue
of subsidy and the timeliness of subsidy? One of the points the
Report in paragraph 3.7 refers to is that certainly in two seasons
now the subsidies have arrived too late or there are barriers
in the way, both in terms of the amount of distance to be travelled
or amount of time that has to be waited before gaining access
to fertiliser, which makes it a less than perfect scheme. What
is being done to remove those sorts of obstacles and what is being
done to make sure that the whole scheme is more timely?
Dr Shafik: Part of the reason
for the delays in previous years was because we had this minority
government situation and the government was unable to pass a budget
until quite late in the fiscal year, hence the fertiliser was
late in being delivered. That was a major factor. This is a large
programme; it reaches 1.6 million households. There have been
implementation delays, but we have been working very closely with
the government through the logistics unit to make sure that the
implementation delays are addressed.
Q54 Mr Carswell: Since 2003 £312
million worth of aid has been given to Malawi. Dr Shafik, how
much of that has been general budget support, approximately?
Dr Shafik: Of the £312 million,
in any particular year, for example in 2008, the budget support
was about £27 million. It has been roughly about a third
of the programme in each year.
Q55 Mr Carswell: About a third of
the total aid budget. Can you personally account for how all of
that is spent? I do not mean can you tell me which tick boxes
and project scores have been met, but can you account for that
in a way that would be credible in a western country to make sure
it is not being siphoned off?
Dr Shafik: We undertake fiduciary
discharge before we approve budget support and that involves a
set of risk assessments that we do before approving a budget support
programme. We have to assess whether a country has fiduciary standards
that are acceptable. We have to ensure that things that are being
spent on are things that we would consider eligible. There is
a set of quite complicated criteria that is an internationally
agreed standard.
Q56 Mr Carswell: So you can account
for it?
Dr Shafik: I can account for it,
yes.
Q57 Mr Carswell: It is not being
used to subsidise Mercedes Benzes or the property market in South
Africa or to top up foreign bank accounts? This is going on, or
it is not?
Dr Shafik: The government has
a spending programme. When you do budget support you are supporting
a broad spending programme. The decision we have to make is, are
we comfortable with the broad areas that the government is spending
on?
Q58 Mr Carswell: What I am trying
to work out is if the British taxpayers' money is ending up being
taken by kleptocracy for personal benefit.
Dr Shafik: The way we address
that is we fund the anti-corruption commission in Malawi.
Q59 Mr Carswell: We give them half
a million pounds.
Dr Shafik: We do, and they are
incredibly active. In fact, if you look at their recent prosecutions
in 2006 the minister of education was prosecuted and fired. They
had 118 cases recommended for prosecution in 2009.
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